Start of Our New HORIZON Series “Environment in Danger”

Under the title “Environment in danger”, our upcoming HORIZON series concentrates on the ecological transformation and therefore looks at all its challenges from various angles.

In our previous HORIZON series, we introduced our 4 Risk Changers model and took a close look at the systemic influences of ecological, geopolitical, technological, and social transformation on a company’s risk landscape.
Other crises, the climate crisis being a prominent example, are more likely to emerge as developments that gradually manifest themselves. The HORIZON – “Risk Thought » Fast Forward” is our community platform for risk thought leadership. It is based on our vision to detect the impact of these systemic risk changers at an early stage and introduce risk management solutions that boost our clients’ resilience. The extent of their impact will only occur in the future and are therefore not immediately apparent. Due to their abstract nature, these developments are overshadowed by immediate events, although their relevance is often more far-reaching and therefore require our utmost attention.

Under the title “Environment in danger”, our upcoming HORIZON series concentrates on the ecological transformation and therefore looks at all its challenges from various angles.

Risk-based methodology for transformation risks

We have developed our risk-based methodology to manage the risks associated with the underlying systemic change. We distinguish between primary transformation risks, which in the case of climate change are climate risks such as natural hazards, which are directly derived from global warming, and secondary transformation risks, which arise from the necessary adaptation of the corporate strategy (including their business models, products, services, applications, processes, and technologies) to the climate crisis thus lead to a change in the risk landscape.
When we look at climate change, primary transformation risks appear as physical risks. They are apparent in form of a changed or an increased exposure to natural disasters, such as floods, storms, hail as well as heat, drought, or a rising sea level. As far as companies are concerned, these risks can cause anything from material damages to disruptions of transport routes, in energy, or raw material supplies.
Besides these primary transformation risks, which affect companies as “pure risks” from the outside, systemic change leads to secondary transformation risks that are “speculative”. They derive from companies’ adapted business strategies that were developed in response to the systemic change and comprise both risks and opportunities.

Transformation of the ecological risk landscape

To master the ecological challenges that lie ahead of us, we will have to tackle a far-reaching transformation of our economic system. The decarbonization of industry, commerce, freight, and passenger transport as well as private households has top priority. This inevitably leads to the switch to renewable energy sources, the promotion of clean mobility, the introduction of new energy management systems and green building technologies, new ways of energy storage, the development of sustainable fuels and ultimately also new methods of carbon dioxide capture, utilization, and storage.
Equally important is the protection of biodiversity through a development towards a circular economy and the careful use of resources, new technologies for clean water, advanced methods in agriculture, but also nature conservation and restoration.
This HORIZON series focuses on the new risks and regulatory challenges that companies face because of this transformation, as well as the role of data analytics and AI in this area. We invited clients and business partners to join our risk thought leadership community and provide some insights on their point of view. Also, many of our employees across our group contributed to this series.
I want to thank them all for growing our community and their efforts in doing so.

Georg Winter


T +43 664 962 39 06

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“To Be or Not to Be”?

Other crises, the climate crisis being a prominent example, are more likely to emerge as developments that gradually manifest themselves. The full extent of their impact will only occur in the future and are therefore not immediately apparent.

“The time is out of joint,” lamented William Shakespeare’s Hamlet more than 400 years ago. Yet, one could be forgiven for thinking he was talking about the confusion of the present day as we battle crisis after crisis.Many of these crises are sudden, tend to be short-term in nature, and are local or industry specific. They affect us directly and persistently demand our full attention.
Other crises, the climate crisis being a prominent example, are more likely to emerge as developments that gradually manifest themselves. The full extent of their impact will only occur in the future and are therefore not immediately apparent. Due to their abstract nature, these developments are overshadowed by immediate events, although their relevance is often more far-reaching and therefore require our utmost attention.

The concrete crisis dilemma

In practice, companies are often faced with the dilemma of focusing on long-term, sometimes even abstract goals and the necessary resources required for them, when suddenly unforeseen events crop up out of the blue, disrupting the sustainable pursuit of measures that are crucial to achieving the changes that are necessary in the long run. The perception of strategic risks is therefore pushed into the background again and again. At the same time, sticking to managing these strategic risks is also an important contribution to being prepared for events that could occur at short notice.
It is human nature to pay close attention to risks that are tangible and have concrete repercussions in the here and now. Abstract dangers that are not immediately a threat to us are neglected in our subjective risk perception.  As a result, politicians are tempted to follow the public mood to maximize their chances of success in the next elections, or the media orients itself accordingly to gain maximum circulation.
In times when public discourse seems to have lost courage and far-sightedness, and society is jumping from one crisis to the next, companies are required to act with foresight and keep an eye on their long-term goals. The urgently needed paradigm shift away from focusing on short-term results towards building strategic resilience is of particular importance.

Why we should listen to the next generation

Many political and economic decision-makers belong to a generation that can look back on an eventful life characterized by confidence and growth. Their diligence and commitment have made a significant contribution to the development of a society in Europe that is based on social prosperity and peaceful coexistence.  To ensure this peaceful coexistence in the future, the tolerance that we have towards our fellow human beings and their risk perception and concerns is of the utmost importance. When dealing with long-term risks, such as the long-term effects of the climate crisis on our personal security and economic existence, it is crucial to include the next generation, which will be directly affected by these effects, and to take their concerns seriously. 

How companies will deal with their ecological risk landscape – a pragmatic scenario

If climate scientists’ models are to be believed, the likelihood and impact of physical hazards will increase dramatically as global average temperatures rise. The climate-related change, which was previously perceived as a long-term development and the consequences of which will only appear in the distant future, will transform itself into an acute danger with immediately noticeable effects due to the drastic increase in suddenly occurring, climate-related events.
A possible scenario could be that the dimension of these primary risks is heading towards a tipping point, at which not only a clear public opinion manifests itself, but also political action becomes unavoidable. By then at the latest, banks and insurance companies as well as investors will place additional, non-material criteria at the centre of their risk assessment.
For both society and the public, the cost of managing these physical risks will be enormous, at some point exceeding the cost of transformation. From this point on, companies will put their full focus on the ecological transformation of their corporate strategy.
The costs of physical risk are becoming a competitive disadvantage for companies. From the tipping point, investments in ecological transformation will therefore pay off insofar as they increase the resilience of the company, open-up new business opportunities, and will ultimately emerge as a decisive competitive advantage.
What does this mean for risk management? In view of the increasing danger from physical climate risks, it is essential to identify their influence on one’s own assets and to eliminate weak points as best as possible. In addition, secondary transformation risks must also be identified as early as possible to be able to develop cause-related and effect-related measures for these, often new, risks.

Insurers – innovation vs. aversion

Insurers also play a key role in mitigating transformation risks. However, it is in their nature to primarily look in the rear-view mirror to be able to assess a risk based on the claim’s history. However, as we do not have the necessary historical data for transformation risks, the insurance market will have to find new ways to be a systemically relevant part of this transformation.
If insurers want to continue to fulfil their role as “enablers of the economy” in the future and not continue to lose industry importance, then it is time to support the transformation with targeted incentives and innovative solutions instead of with a restrictive underwriting policy only to keep an eye on their own risk landscape.
Therefore, the insurance market must be proactively involved in the transformation at an early stage. The prerequisite for this is the combination of the company’s agile and transparent risk management strategy, coupled with proactive risk mediation by the broker.  Only through a joint effort will we be able to meet the challenges of the transformation ahead of us. What matters here is a sense of responsibility, future orientation, and mutual respect, because only a functioning risk partnership between companies, risk carriers and brokers will be able to contribute to the well-being of our society.

Georg Winter


T +43 664 962 39 06

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Be more agile! How to anticipate a transforming risk landscape

An effective risk management process is a basic requirement for tackling transformation risks. In most cases, the risk analysis that goes with identifying risks focuses on actual risks. Abstract risks, which are currently hard to assess and thus difficult to evaluate, yet which in essence derive from systemic change or resultant strategic decisions, are often overlooked. However, to master the ever-increasing speed of change we are challenged to adjust the pace with which we tackle the associated risks. Agile risk management plays a decisive role in this process.

My first article of the current HORIZON series introduced our 4 Risk Changers model and put the spotlight on the multiple challenges faced by companies. In the light of ongoing and rapid change, these challenges are to date omnipresent.
Based on our vast experience and extensive expertise in corporate risks, I consider these complex changes as systemic risks. I have categorised them as ecological, geopolitical, technological, and social transformation risks.

The 4 Risk Changers

Unlike the tangible assets in former years, it is now the intangible assets which increasingly influence the transformation of companies’ risk environment. The major challenges for a forward-looking risk management are posed less by the concrete individual risks at an operating level but more by the abstract systemic risks which are caused by global events and external developments.
Central to my view are the effects of this systemic change on the risk situation of companies. Also, I differentiate between primary and secondary transformation risks.

  • Primary transformation risks derive directly from the risks associated with systemic change. For example, the impact of the war in Ukraine on the supply of energy and the development of prices in Europe are a result of geopolitical transformation.
  • Secondary transformation risks are typically speculative. They include both risks and opportunities and derive from the metamorphosis which companies have undergone because of systemic change. The aim is to emerge from the crisis stronger than before and/or take advantage of the new opportunities presented by this change. The resultant new risks – despite being abstract – are of great significance and cannot be ignored. They must be viewed from a holistic perspective.

How systemic change affects insurance

Primary and secondary risks tend to increase during a transformation process. They evolve over time. At the beginning, these transformation risks can only be identified with great difficulty. Most of the time we tend to pay less attention to them. Only when they reach a specific threshold, when we become aware of “soft signals”, can they be identified as such and dealt with by risk management.
As is the case with conventional “emerging risks”, the required risk assessment, however, lacks experience, i.e. it lacks historical data and information, presenting an obstacle for analysing transformation risks.

When developing suitable risk management strategies, the attempt to transfer these risks to the insurance market as part of the development of suitable risk management strategies is bound to fail in most cases. The principle of insurability applies. This means, a risk must be measurable for the insurance market to secure adequate capacities. If there is no measurability – as opposed to the maximum loss calculation in the case of fire risks, where the possible maximum loss (PML) represents the maximum expected damage caused – it will be determined based on data modelling of historical risk and claims as well as on actuarial assumptions.

Transforming risk landscape affects insurability

Since new risks and transformation risks lack the required historical data, there is usually also a lack of availability of insurance capacities, especially in their uncertain early stages of development. Adequate insurance solutions (can) only come into being over time.
The current systemic transformation leads to numerous new and changing risks which cause companies’ risk landscapes to change permanently and at an increasingly rapid pace. These dynamics now result in less and less insurance for operational risks, which in the past were adequately and successfully insured.
Thus, as the gap between the lack of insurability and company risks continues to widen, there is an urgent need for the implementation of new methods in risk management.

A transforming risk landscape is often ignored

In practice, many risk management systems that have been implemented only manage concrete risks which already exist. Due to a lack of both early-warning mechanisms and the outside perspective on systemic change and its global events, the risk analysis focus is still on the known and assessable risks. The attention is on the actual situation of the risk environment.
Today’s abstract risks, i.e. risks which still evolve as a result of the changing business environment and have therefore not yet occurred or new risks arising from strategic changes in the business model that aim at seizing new opportunities, are often ignored. In practice, the resultant transformation of the risk landscape is hardly ever anticipated. It is only dealt with once risks manifest themselves because that is when they can be identified and assessed accordingly.
So, how can risk management help to tackle increasing volatility, uncertainty, complexity, and ambiguity and, in turn, boost the resilience of companies? An effective approach that facilitates an agile management of abstract transformation risks needs to be implemented. Existing risk management processes must widen their scope and perspective with some type of risk forecasts, enabling risk managers to anticipate risks at an early stage and allowing them to better prepare themselves.

Agile approach to anticipate transformation

Quite often, we encounter situations where a company’s risk management is organised in closed administrative departments which function like silos that were put in place to comply with legal requirements. Because such risk management deals with risks at an individual level only, its benefit as a company-wide tool to effectively manage risks often fails to achieve its full value.

Systemic change - Primary and secondary risks

The agile management of risks and opportunities is based on a corporate culture that is open-minded towards such risks and opportunities and is organised around transparency, dialogue, trust, and constant feedback cycles.
It comprises interdisciplinary teams whose members act with utmost flexibility as and when needed and who are an integral part of strategic and operative decision-making processes.
That way, transformation risks can be anticipated and acted upon at an early stage. This boosts the resilience of companies, enabling them to make the most out of future opportunities.
Anticipating transformation risks at an early stage means viewing the world from a future perspective and interpreting the inherent risk situation in the best possible way. Paying attention to soft signals, like new and shifting trends, as well as an open-minded attitude towards strategic considerations helps the establishment of effective early-warning indicators to manage risks.

Agility drives insurability and strengthens resilience

As a risk specialist, it is our vision to manage the risks of our clients in such way that they can rest assured and focus on their core business.
As a loyal and trustworthy partner, we work for and with our clients in flexible, interdisciplinary teams where we prove our transparent, dialogue-driven culture every day.
We anticipate systemic change and proactively direct our organisation towards the future needs of our clients. Agile risk management plays a key role for us.
In future, our progressive service approach will focus even more strongly on anticipating any change and resultant risks at an early stage.
HORIZON – “Risk Thought » Fast Forward” is our platform for risk-thought leadership. It follows our ambition to anticipate systemic change at an early stage, drive the insurability of a transforming risk landscape and create value through tailored solutions that strengthen our clients’ resilience and protect their future ventures.
GrECo, matter of trust.

Georg Winter


T +43 664 962 39 06

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”The World Is in Big Trouble.“

Our CEO Georg Winter shares his views on why geopolitical transformation is our focus this year and why it exacerbates existing risks and causes new risks to emerge.

Secretary-General António Guterres made this statement at the General Assembly of the United Nations on 20th September 2022 in New York.

We are undergoing times of permanent change, which many refer to as systemic transformation or multiple crises strung together. This change takes place in different fields and segments. They, in turn, are interlinked at various levels. HORIZON’s risk-oriented approach aims to define and outline the key areas of change affecting your company. In doing so, we take a close look at the systemic influences of ecological, geopolitical, technological and social transformation on your company’s risk landscape.

The 4 Risk Changers

The 4 Risk Changers

These transformation processes are very dynamic, they are often interdependent and thus characterised as complex processes. They also result in systemic risks. Managing them requires much more than traditional methods of risk management.

In terms of risk management, we refer to these systemic risks as “risk changers” that directly affect companies and categorise them as follows:

  • “Environment in danger” for ecological,
  • “Beyond globalisation” for geopolitical,
  • “Digital transition” for technological and
  • “Social disruption” for social transformation.

HORIZON – “Risk Thought » Fast Forward” is our platform for so-called risk thought leadership. It is based on our vision to detect the impact of these risk changers at an early stage and introduce risk management solutions that boost our clients’ resilience.

How do the 4 Risk Changers affect companies?

Companies are exposed to various kinds of risks. At the same time, systemic transformation exacerbates existing risks and causes new risks to emerge. These primary risks have a direct bearing on companies.

 How do the 4 Risk Changers affect companies?

Primary risks – Transformation leads to direct exposure

Ecological risks
When we look at climate change, we refer to climate risks. They are apparent in form of a changed or an increased exposure to natural disasters, such as floods, storms, hail as well as heat, drought or a rising sea level. As far as companies are concerned, these risks can cause anything from material damages to disruptions of transport routes, in energy, or raw material supplies.
Geopolitical risks
Geopolitical change, characterised by an economic bloc having been established between the USA and China, has put free world trade to the test. It also shows, by looking at Russia’s invasion of Ukraine, just how quickly a system conflict, which we thought had been settled between the democratic and autocratic world, can be reignited. All that, exacerbated by global events, like the Covid-19 pandemic, puts pressure on the availability of energy resources, disrupts supply chains and leads to a global wave of price hikes that challenge governments, businesses, and the civilian population alike.
Technological risks
Technological change has resulted in an over-dependence on data, software and IT infrastructure. All are targets of a rapid increase of cyber threats all over the world and are thus one of the biggest threats of the 21st century.
Social risks
The growing divide between rich and poor, the lack of equal opportunities regarding age, ethnic background and nationality, gender and gender identity, physical and mental abilities, religion and ideology, sexual orientation and identity as well as social backgrounds increases social tensions. The Club of Rome deems equality and justice as part of the ideal solution for a liveable future.

Companies cannot shirk their responsibility in this regard. For instance, social issues are becoming more and more important as we are facing an inevitable demographic change that has already resulted in a systemic shortages on the job market.
The interdependency of these systemic risks is best demonstrated by the war in Ukraine: From a geopolitical point of view, it has led to an energy crisis. In terms of technology, it has led to an increasing number of cyber threats. On top of that, well-targeted campaigns are aimed at splitting society and disturbing social peace in our Western world. From an ecological perspective, however, there is hope that our efforts to reduce carbon dioxide emissions can finally be carried through.
Systemic change – Primary and secondary risks

Systemic change - Primary and secondary risks

Secondary risks – Adaption creates new chances and challenges

Besides these primary transformation risks, which affect companies as “pure risks” from the outside, systemic change leads to secondary transformation risks that are “speculative”. They derive from companies’ adapted business models that were developed in response to the systemic change and comprise both risks and opportunities.
Ecological adaption
In the fight against climate change, many companies have decarbonised their processes or have developed sustainable products. Saving resources and taking advantage of new opportunities are key focal points. However, new products and processes lead to new risks that must be identified at an early stage.
Geopolitical adaption
As a result of the geopolitical change, companies had to explore new markets and new sources for raw materials and find new ways of attracting both customers and suppliers, while keeping a watchful eye on possible dangers. Although the currently rising energy prices still paint a different picture, supply chains can be shortened through nearshoring. This could very well result in a wave of reindustrialisation in Europe.  
Technological adaption
Technological change enables us to pursue totally new paths. While the automation and digitisation of value chains is gaining importance, the full potential of mergers, transparency, big data, and metadata remains to be exploited. Manufacturers of previously traditional products and services are becoming system providers, goods are being replaced by data, and machines by platforms.
Social adaption
In the past, humans used to be regarded as resources. Now, humans with all their resources take centre stage. The concept of Industry 5.0. does exactly that. It places the human being at the centre to promote and foster diversity, different talents, and activities. Many companies have already initiated a transformation process because employees nowadays attach more importance on meaningful work. They believe that they can make a difference when it comes to resilience and sustainability.

Beyond globalisation – Geopolitical transformation in the spotlight

The upcoming release of HORIZON will concentrate on the geopolitical transformation and therefore looks at all its challenges from various angles.
New political world order
Does the war in Ukraine show us the dramatic face of a new political world order and how does this conflict at the very centre of Eastern Europe disrupt our economic basis?
How will the global trend of bloc formation between democratic and autocratic countries influence companies’ global business activities in the future?
What is the risk of technology being abused as an instrument of power and how could this affect companies?
How will the increasing conflict between the USA and China influence global economic relations?

Energy crisis
Blackout and a cold winter – how can we prepare for a total outage?
Will the current shortage of natural resources ruin Europe’s industry or will an ambitious energy transition turn Europe into a role model for a green global economy?

Supply chain dilemma
Will the geopolitical transformation result in a new era of offshoring, or will regional supply chains and increasing investments in circular economy boost independence and resilience?
How will China´s rise continue – considering its growing regional influence along the new silk road – and what will be the effect of its strategy of isolation as a result of its zero-tolerance pandemic policy?
Is the conflict over Taiwan’s independence a ticking time bomb for the global economy?

Loss of wealth
Will double-digit price increases lead to a decreased standard of living over the long term?
Does high inflation increase the risk of social riots in Europe?
How do these circumstances influence people’s work-life balance and their work attitude?
What does a new wave of migration mean for European companies and their DE&I (Diversity, Equity, and Inclusion) agenda?
It is indeed a difficult and challenging situation that raises many most pressing questions. We need to discuss them, their impact on the transformation of the risk landscape as well as possible solution scenarios.
Stay tuned!

Georg Winter


T +43 664 962 39 06

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Transformation in Global Insurance

Transformation in Global Insurance

After a series of big mergers at the end of the last century and a period of increasing financial stability, global insurance is now heading for a time of disruption and changing parameters: Climate change, pandemics, war and sanctions are becoming a part of the Western world. Inflation, digitisation, demographics and changes in work behaviour are among the most important factors affecting an industry that is still solidly based on 19th-century economic principles. How will global insurance and reinsurance adapt to new challenges and navigate the stormy waters of the 21st century?

It would be an exaggeration to speak of a “historical turning point” in the insurance industry, a term politicians nowadays use to describe global changes related to the war in Ukraine. Rather, we see a constant flow of changes having been made possible by technical improvements – both in know-how and advances in IT – as well as by management decisions, some of which set new directions in the development of this industrial sector.

A quarter of a century ago, when insurance managers were unsure if their clients’ data would survive the turn of the century because computers might not be able to recognise the new millennium, as the number ’99’ denoted contracts without a specific expiration – a phenomenon called the Y2K bug – there was even greater concern with respect to the level of operating costs. Too many employees administrated contracts and sold insurances only with the help of heaps of paper because IT was far from being fully automated. The answer to this was to merge companies to at least reduce overheads by creating a greater span of control. Statistics based on past premium and loss ratios, the “burning cost” method only considered past losses, and model calculations of future loss scenarios were too complicated and insufficient. Companies could only compensate for this situation with relatively high premiums, lower average wages, and substantial capital gains due to higher interest rates.

Technological transformation of the insurance world

The rapid development of IT office tools in the first years of the new century brought about a revolution (not only) in industrial risk calculation. For the first time, NatCat scenarios could be comprehensively evaluated and forecasts made, at least for catastrophes due to weather events. The tremendous development of access to the Internet made data collection from all parts of the world much easier. This has brought stability to the portfolio as insurers have gained a better understanding of the cost of claims that might be expected in the future.
Of course, losses from natural catastrophes increase further, there is a higher frequency and extent of individual events due to climate change and the concentration of insured goods in exposed areas, such as densely populated settlements on the coasts. These developments can still be included in the calculation of premiums. However, the weather phenomena that have increasingly occurred in recent years are a cause of great concern because their effects are longer lasting than those of individual events. First and foremost, it is the rise in temperature, especially in large cities, and large-scale droughts that claim numerous lives and destroy property every year. Especially in the case of agricultural risks, the limit of global insurance capacities is being reached. Hence, other means of compensating for damages must be found, often by the states themselves.
The insurance industry is therefore quite willing to adopt the efforts needed to achieve the Paris climate goals and other measures specified by EU legislation, such as the Taxonomy Regulation. For the time being, the leverage consists in restricting investments in companies that do not (or no longer) comply with the taxonomy as well as in refusing to insure such risks – the most typical example, at the moment, is coal. This strategy, known as “Net-Zero”, aims to encourage the transition to new processes for generating energy and new production methods in various industrial sectors.

Increased willingness to take over new risks

In the new millennium, great progress was also made in reducing the risk of fire through new, safer industrial processes, but above all through a greater awareness in companies for fire protection measures. This was one of the main drivers of the so-called soft market over the past two decades, which was not only a result of the commercial strategies of insurers. It is astonishing that this market behaviour has lasted for so long, despite insurers facing a constantly declining income from investments. At the same time, the results from sole insurance activities, defined by the “combined ratio” (= premium less claims and costs), have constantly improved.
This has also increased the willingness to take over risks that were previously considered uninsurable or very difficult to insure. These include the aforementioned natural hazards, including earthquakes, but also an ever-increasing expansion of coverage in business interruption insurance to cover risks associated with supply chains. It now seems that there are new restrictions concerning either the cover itself or individual premium corrections that are still pending. Hence, we may see a return to the hard market.
These transformation processes in technical, risk-related areas are not yet that spectacular. In fact, insurers are contemplating whether or not they should continue to have the same structure as in the past – as large, personnel-intensive companies that handle the entire business process from the first customer contact to the settlement of claims, from the maintenance of large office buildings to comprehensive processing of their own data. A number of external factors are responsible for the fact that it is more likely that these organisations will be split into small special units with increased outsourcing. In the ​​ core business, capacities are already being shifted back to special companies and outsourced underwriting agencies. Other areas, such as building management or data processing, are also suitable candidates.

Insurance transformation and Covid-19 pandemic

The Covid-19 pandemic – which has led to different financial burdens on individual insurance markets – has fundamentally changed the professional world through the widespread use of home office work solutions. Insurance is a particularly labour-intensive sector of the economy, but it has the great advantage that most of the work does not necessarily have to be carried out at the location of the company. Thus, home office work solutions will, at least partially, become the new norm in the insurance business of the future, with all the consequences, such as fewer office space requirements, more powerful IT systems and a stronger focus on social issues on part of management.
Even before the outbreak of the pandemic, there were intense discussions as to whether the sales process could be shifted to the Internet, just like in other business sectors, which would mean a drastic reduction in sales staff. Findings thus far show that the insurance customer likes to search for information and offers electronically, but still prefers the advice of a physical person when concluding an insurance contract. This can be explained by the complexity of insurance products as well as by the fact that most people interested in insurance would rather entrust their sensitive data to a person than to a machine. However, we can expect that future generations of “digital natives” will increasingly conclude their insurance contracts online. The insurance sector is therefore also investing in expanding its online options, for the time being primarily in products that require little explanation. The number of such products might increase in the more traditional or core areas of private insurance as well. The widespread shortage of skilled workers could fast-track this transformation.
However, insurance advisors do not have to worry that their work and jobs will become obsolete. On the contrary, providing expert advice about products will still remain their main task -, especially in corporate insurance, where the role of the advisor will gradually shift to ​​risk evaluation and risk management. Additionally, they will also continue to provide certain ancillary services.
As mentioned above, insurers have significantly increased their willingness to take on new and additional risks in recent decades. In addition to the property insurance risks, new offers in terms of so-called Financial lines, covers such as D&O and Cyber, and even more special solutions are now a standard, not just for large companies. Currently, some rethinking seems to be taking place, partially initiated by the war in Ukraine. Insurers are rediscovering the possibility of saying “no” to certain risks across the board. An example is the exclusion of entire territories from cover, such as Russia, or the withdrawal from certain exposed sectors, such as Cyber. The principle that “everything is insurable as long as there is an adequate premium for the risk” is overridden when other fundamental factors such as the principles required by governance and compliance come into play.
Other challenges, such as the current inflation and the continued low investment income, which will probably also lag behind inflation in the near future, will not be discussed here due to a lack of space. These challenges have either subsisted for a long time or they keep coming back. The insurance industry has learned to live with them and is still able to report very good economic results every quarter.
In summary, the transformation in the insurance industry can best be described with an image: The market participants are developing from large tanker vessels, which operate with many sailors and use nautical charts made of paper, to fleets of small, largely automated ships, which are heading towards their ports of destination with the help of GPS .

The article is written by Andreas Krebs.

Paul Spittau

Head of Group Carrier Relations & Insurance Mediation

T +43 664 537 17 42

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Innovations on the Way

Driverless transport systems, packaging, loading and reloading are already typical robotic examples which will gain in importance.

Recognising, avoiding and minimising risks while insuring the remaining, often huge risks – if still insurable in light of reassurance capacities – is a key measure in business. It is also a challenge because globalisation and its worldwide networks harbour considerable risk potential. Such risk may threaten the very existence of businesses and is therefore ideally transferred to the insurer. Additionally, professionally managed businesses also face the risks associated with an increasing number of natural hazards due to climate change. That is why all parties involved in trade and transport supply chains are called upon to join forces to fight the ill effects of climate change, meet the ever more stringent legal requirements and adopt a responsible environmental policy.

Securing livelihoods and saving resources

Insurances cover major damages and losses. They help secure one’s livelihood and ensure that businesses can be kept up and running. It even makes sense to insure a seemingly small potential for damages because such risks can be quite complex, tie up considerable human resources or end up in a legal cross-border dispute. If that is the case, a lack of contact to the required legal experts or lack of knowledge of applicable law, uncertainty as to the place of jurisdiction, inexperience with foreign case law, and local civil provisions can exacerbate the dispute.
D&O, business liability, legal protection, transport liability, motor vehicle third party liability, collision, machine failure, accident, life, disability cover, buildings, inventory and equipment, storage and warehouses, business interruption, electronics, cyber, cargo, and so on. These keywords are part and parcel of the transport and logistics business and these risks need to be properly insured.

More liability claims

Parallel to the increasing amount of liability claims we saw over the last few years, we also noted more unjustified claims. The prevention of damage claims as part of liability insurance policies will therefore gain in importance – especially in the case of business liability and transport liability. In dealing with such claims, brokers will be challenged to use all their skills, knowledge and experience, and exercise a fair portion of sound judgement, put the client (and in turn his/her customer) first and not burn bridges that may have taken years to build. Simply rejecting a claim without proper explanation is not good enough, it is also counter-productive. Rather, the policy holder’s contractual partner as well as the injured party should be properly informed as to why a claim has been rejected and why the insurer will not pay for damages. Offering such explanations helps create a better understanding, even if the insured may not be entirely satisfied with the outcome at the time.

Spotting challenges early on

Spotting and identifying future challenges in the face of changing circumstances will become the order
of the day. Even if most developments are difficult to predict and often turn out to be megatrends, it is prudent to think ahead and incorporate them into the business strategy. That way, the right steps can be taken should such trends materialise. In this sense, it is important to remember that large corporations not only tend to take the lead in developing mega trends, they also play an active part in driving their development to demonstrate innovation leadership.

Focus on customer needs

By putting the spotlight on innovation leadership, coupled with strategic considerations to reduce costs and increase profits, large logistics companies have implemented ever shorter delivery times. In doing so, they have awoken their customers’ desire to receive goods as quickly as possible. Buzzwords like SDD (same day delivery) or JIT (just in time) come to mind. As a result, it will no longer be a case of the big fish eating the small fish but rather the fast eventually eating the slow. It is the fast companies that will grow quicker – an exception being niche market specialists. However, fast also means more risks. For example, JIT raw materials or semi-finished products can result in damages caused by production downtimes or a stoppage if, for example, the production company lacks the very same JIT raw materials in case of a delayed delivery by the carrier. In the event of a CMR (Convention relative au contrat de transport international de marchandises par route) case, for example, claims for damages which are usually limited may be turned into a case of gross negligence or even a wilful misconduct to lift this limit and ensure full compensation. Such payments could amount to millions of euros. This highlights the significance of a solid transport liability insurance, not only for the carrier but also for freight forwarders as the forwarder – if he concludes a contract of carriage – shall be liable also acts and omissions of his agents and servants.

Otmar Tuma

Advisor Transportation & Logistics

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Accelerated change

The insurance industry is connected in several ways to the real estate industry. It is one of the largest investors, as insurers are bound to have a stable investment portfolio for the funds
entrusted to them in the form of premium payments for life and other insurances.

The Covid-19 pandemic has accelerated existing trends which will continue to shape the real estate sector in the years to come. Digitisation, remote working and online shopping are driving these trends. The industry’s environmental, social and governance agenda reinforces them.
To mitigate the disastrous effects of lockdowns on their economies, many states have made unprecedented levels of fiscal and monetary stimuli available. This loose monetary environment helps keep interest rates low and reinforces investment in the real estate sector, which has always been considered a safe haven during crises. At the same time, real estate offers compelling yields for investors.
Lenders, however, have adopted a more cautious stance. Increased uncertainty with regards to businesses being able to operate and earn the money to repay loans against the backdrop of global supply chain disruptions have led to tougher lending criteria. Government subsidies and postponed payment obligations are expected to end soon. Inevitably, there will be some distressed debt as a result. Banks that have pulled back have at the same time opened up the opportunity for non-bank lenders.

Yet, the cardinal issue in real estate remains: the solvency of tenants.

Residential vs. office sector

Residential real estate develops steadily, with housing investments being part of an ESG-driven search for affordable housing that includes environmental aspects in design and execution. The office sector, however, is subject to fundamental change.
Though offices in many regions have opened again and businesses have returned to normal operation for the time being, the disruptive forces of the pandemic have shown that other organisational structures and new ways of workforce interaction led to changing requirements in office space. Employers and employees alike see the benefit of avoiding long commute times by working from home. Although voices proclaiming the end of the office have become quieter, it is unlikely that the majority will switch to pure remote operation.
Rather, mixed working models will be implemented, leading to major shifts in the market. This trend also coincides with an increased focus on quality of living. Above all it has to be borne in mind that, as time goes on, the upsides and advantages of actual interaction among colleagues in the office will retain their importance even though office space may be used differently than in the past.
The hospitality and retail sectors have been hit the hardest because most capital will continue to flow into other sectors that promise greater stability or even growth. The physical retail sector was affected by an increasing shift towards online sales already before the outbreak of Covid-19, the exception being essential and convenience shopping as these sectors were also largely exempted from lockdowns.

Environmental affairs

Decarbonisation is an ubiquitous term nowadays. Although discussions about climate change have been around for the better part of the last half century, it is only in the past 18-24 months that these issues have received the indus- try’s focused attention. The dynamics of climate change are currently still driven by finance providers, who pledge many of their funds and products to the cause of acting responsibly and in accordance with ESG criteria. Larger tenants reinforce the dynamics by actively requesting ESG-compliant assets and thus boost the demand.
But environmental concerns are also found in many other contexts. Growth and expansion for instance inevitably lead to questions around soil sealing. This is defined as the covering of soil by buildings, structures, and other layers with completely or partially impermeable artificial material such as asphalt or concrete. It is one of the most intense forms of land take and often irreversible. Soil sealing is directly associated with other soil threats, for example soil biodiversity, flooding and landslides, soil compaction and soil contamination.
Most social and economic activities require some form of land take and sealed areas. An expansion of existing settlements puts pressure on sites previously being used for agricultural purposes. According
to the European Environment Agency, the main drivers of land take between 2000-2018 were industrial and commercial land use as well as the extension of residential areas and construction sites. In this period, land take in the EU28 amounted to 539 km2/year, consuming 0.6% of all arable lands and permanent crops, 0.5% of all pastures and mosaic farmlands and 0.3% of all grass- lands. To counter this development, a three-tiered approach is advised, which consists of limiting (L), mitigating (M) and compensating (C) soil sealing. Various measures such as green roofs, permeable surfaces for driveways, reuse of topsoil, but also de-sealing exist already and are among the issues any real estate developer must deal with.

The power of new technologies

New materials are being tested and introduced to make buildings more energy efficient and reduce the carbon footprint while stepping up durability as well as resilience against adverse climate conditions. As climate change, wildfires and floods appear almost every day in the news, developers, tenants and governments alike are keen on bracing themselves for the future. France for instance is actively seeking a way to “heatwave proof”
its cities to make them more liveable during hot summers. Urban heat islands are a new challenge, as they do not cool off during nights, putting strain on the population. At the same time, firefighters struggle to control blazing fires in the surrounding rural areas.
Technology is rapidly changing the way we live and work. Big data, artificial intelligence and IoT are key topics for any real estate development. State- of-the-art sensors can assist in predictive maintenance and optimise both usage and the energy profile of buildings.

Solutions for emerging risks

The insurance industry is connected in several ways to the real estate industry. It is one of the largest investors, as insurers are bound to have a stable investment portfolio for the funds
entrusted to them in the form of premium payments for life and other insurances. Furthermore, margins in real estate are still attractive given the low interest rate environment, and in case of a higher volatility of prices or an inflation in the Eurozone it is also a good hedge against that.
The real estate industry is also key to insurance companies’ operational business, protecting its clients against the adverse effects from the development and operation of assets. In traditional lines such as property insurance and general liability, prices have recently risen, reflecting the negative results insurers have experienced in a competitive low premium environment. Recent claims have reinforced the focus on business interruption, be it due to tenants going out of business or the increased awareness in the wake of the
Covid-19 pandemic that such events can endanger the very existence of a business operation.
Digitisation leads to new exposures in terms of cyber insurance for real estate operators in all sectors. Specific insurance solutions can help to counter the threat emanating from the cyber sphere. Less widely known products such as parametric insurances or loss of footfall insurance cover the probability of a predefined triggering event happening. They are detached from the former principle that damage to one’s own insured property is the only trigger for insurance coverage.
As far as real estate investment or asset management is concerned, there are an increasing number of financial professional liability claims. Insurance products like an Investment Management Insurance in the form of a multiline insurance bridge the gap between a cover for criminal deliberate acts of employees, directors and officers and a liability cover for financial loss due to wrongful professional acts. They are a valuable insurance proposition for real estate investment companies and fund managers.

Richard Krammer

Group Practice Leader Construction & Real Estate

T +43 664 810 29 63

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Setting the Technological Pace

Motor insurance used to be a pretty standardised product. This will change.

Many discussions have already taken place concerning cars’ technical developments (self-driving cars) or new and different business models (e.g. car-sharing). No doubt, the future of the motor insurance business will look quite different than in the past years. Some even believe that motor liability insurance might be replaced by product liability insurance because of self-driving cars. But what can we really expect in the next 20 years in the EU?

Self-driving cars

Yes, we are testing them, some of the cars offer additional functionalities, the driver though is still needed behind the wheel. Full self-driving cars are not on the streets yet, and if they come, they will probably be mostly used in cities and with low market penetration. Furthermore, self-driving cars come with functionalities that are quite expensive. They may not be affordable for most of the people. We expect to still see ordinary cars on our roads for at least the next 20 years or even longer, especially if we look towards the countryside. The same applies to trucks, busses, tractors and so on. We therefore do not believe that motor liability insurance will be replaced by product liability insurance in the next 20 years – at least not yet.

 Less accidents, yet higher repair costs

Smarter cars can avoid a lot of accidents and thus reduce the likelihood of damages. For example,
a car’s automatic braking system reacts much quicker than any human would. Hence, the accident frequency will be lower the smarter cars become. However, in case of an accident, repair costs are much higher because smart cars are more complex. While there may be less accidents with smart cars repair costs will be higher. Therefore, we do not expect a major decrease in insurance premiums.


Driving behaviour versus anonymity

Another very interesting feature may become a game changer. Knowing how much we drive, how we drive and where we are heading is part of the data that is already stored in smart cars today. But, for the majority of the people this bears a risk because they give up their anonymity, especially if their data is used by the insurance. It might work as long as the insurance premium remains unchanged but sharing data with the insurer as part of a risk assessment might be a problem for most drivers. Considering data protection discussions about the extent to which we willingly share or even give up data, we may want to opt for more anonymity in the future. Not- withstanding that, as cars’ technical functionalities become smarter, some of the data they provide will be used by the motor insurance to assess individual risks. However, in the next 20 years, the majority of motor insurance risks will probably not be calculated on the basis of data provided by driving behaviour.

Sharing economy principles

Car sharing offers new and interesting opportunities and steps up mobility. New things are always
interesting, everyone want to test them. This type of service will attract a specific target group of customers, mostly in bigger cities. The price of the service will be decisive for customers choosing this option. Despite the merits of the service provided, there will still be many people who prefer their own car and who would not want to share it with someone else. During the Covid-19 pandemic, more people also bought a car to simply avoid public transport. While sharing economy principles are on the rise and we recognise the opportunities that come with them, we have not identified a trend that points towards less cars in the near future or fewer cars being purchased.

Regulations and compliance

Regulations are always a consequence of real life. First, there are new opportunities, innovations, and start-ups. In a second step, regulations follow. The BOLT or Uber taxi service platform serves as a prime example. When they launched their services there were no regulations. BOLT and Uber had more freedom to structure their business. Once it became clear that the service they provide is a taxi service, they had
to comply with old and even new regulations. The same will apply to the use of customer’s personal data in insurance, self-driving cars, everyday traffic and so on. In the EU, we are faced with all kinds of regulations. The main question is how to strike a balance between innovation, customer protection and regulations.
As far as cars are concerned, we already see more innovation, new features, and new opportunities on the horizon. However, in terms of motor insurance, we do not expect any major changes in the next 20 years – especially in the case of MTPL (motor third party liability) and MOD (motor own damage) insurance.

New ways of insurance purchase

Customers consider insurance as boring, very difficult to understand, and it certainly is not among the most popular things they purchase. Therefore, the way insurance is sold or used will change. For example, motor insurance will be part of a car purchase or rental. In the case of an accident, the car will be repaired at the dealership or at the agreed repair shop.
Another option for customers will be a subscription-based insurance that goes hand in hand with one’s mobile phone invoice. By treating motor insurance as a commodity, the way it is bought and used will change significantly in the next years.

Fleets make us of driving behaviour measurement

Already, companies operating truck, bus or even tractor fleets use different driving behaviour measurement systems to better understand how the driver operates the vehicle, how much fuel is consumed and so on. Some of the companies even offer their drivers an additional bonus if they save on fuel. Such measurement systems are not yet widely used for insurance purposes. We expect their usage to pick up in future because companies will then be better able to control their insurance costs. All other business models based on sharing economy principles, BOLT or Uber taxi services will probably also use this solution. We therefore expect an increased use of driving behaviour measurement systems linked to the motor insurance of fleet owners and operators in the next years.

Different insurance premiums for smart cars

The smarter cars become, the more safety and convenience functions tare packed into them. Likewise, regulations require minimum standards for cars equipped with safety features, such as the e-call emergency function. Today however, insurers do not yet use such functions in their motor insurance risk assessment procedure. This will change in the future. For example, in cities, most accidents are rear-end collisions. Cars equipped with specific city assistance packages pose a lower risk. We can therefore expect risk assessments based on cars’ safety systems to gain in importance in the next years.

More insurance product developments

More insurance product developments
Motor insurance used to be a pretty standardised product. This will change. First, the MTPL will be addressed, especially when dealing with older cars. Because clients’ needs, are more complex than a standard MTPL cover product development and packaging will have to be stepped up. The same applies to MOD. For example, the cover for a trailer, for bicycles transported on a car roof or
for a roof box with contents usually requires add-on covers. Product developments will therefore pick up in the next years.
As technological progress in the automotive industry and mobility sector has picked up pace, we may soon no longer be driving our cars by ourselves, nor might we own them. While these changes are imminent, no major changes are expected in motor insurance volumes in the next years. MTPL products will also continue to serve their purpose. What will change is the way motor insurance will be sold or purchased. Insurers are therefore challenged to come up with new products.

Igor Fedotov

CEO IIZI Estonia GrECo Baltics

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Quo Vadis sanitas?

There are three megatrends which will affect the entire healthcare system in the near future: an increasing and aging population, lack of medical staff as well as a rising dependency on new technologies

The world around us is changing. Peoples’ needs are changing, and in the face of the ongoing Covid-19 pandemic, there is a lot of uncertainty: Can the medical sector and accompanying technology companies
meet these growing challenges? What will be the impact on risk management in the healthcare system?
There are three megatrends which will affect the entire healthcare system in the near future: an increasing and aging population, lack of medical staff as well as a rising dependency on new technologies.

Overaged population

In 1950, the earth’s population was
2.5 billion people, in 2019 it had grown to 7.7 billion. According to United Nations projections, our pop- ulation will count about 10 billion people by 2060. Besides population growth, aging presents another challenge. Data published by the European Union shows that 65-year- old and older people will account for 28.5% of all EU citizens in 2050. In other words, every third European will be a senior citizen.
This also means that the current healthcare system will not be able to meet the expectations and demands of its patients. As the life expectancy of Europeans increases, the period in which they might become chronically ill and require intensive medical care will increase as well. Amongst the younger generation new diseases are emerging, including those related to civilisation. Added to that, the number of skilled medical staff is decreasing (already a third of them are considering a resignation), and so is the number of hospital beds. According to some of forecasts, Europe will be faced with a shortage of over 4 million medical staff members by 2030.

Notwithstanding that, the pandemic has revolutionised the healthcare industry in a rather positive way. It is difficult to imagine another business sector that had to adapt to the crisis in such a short time, implement new client servicing models and increase the use of technology.
At the beginning of 2020, the worldwide healthcare industry had to grapple with a supply chain crisis as well. The demand for personal protection equipment spiked within weeks and it took a few months until suppliers could again meet this demand. At the same time, hospitals and doctors were so engaged with the care of Covid patients that unfortunately other health disorders were neglected. This gave impetus to the development of telemedicine which, until 2019, was tucked away in a niche market.

Upsurge of new technologies

Telemedicine comes with numerous advantages. Most of all it offers a wider spectrum of services, it is easy to make an appointment, and it is time-efficient for the medical doctor. The implementation of electronic prescriptions was a milestone in many EU countries.
Telemedicine also comes with the challenge of risking errors and omissions. Shorter appointment times and not being able to see the patient in person may in some cases lead to a misdiagnosis. And while telemedicine may be convenient for most people, those who are tech-reluctant could be excluded or prevented from the online accessibility to medical services.
The use of new technologies in medical services is becoming more common year after year. For example, the use of pulse oximeters has supported the treatment of watches and remote stethoscopes are already great helpers and may speed up patient diagnosis.

Typically, such opportunities are accompanied by threats. While the development of technology, the use of Internet of Things (IoT) in medical services and artificial intelligence can support doctors with a preliminary patient diagnosis, and boost their efficiency, there are also risks. Human lives depend on the technology used. It must therefore be fully reliable and medical staff must be well trained and comfort- able in using it. Just think of the Da Vinci surgical robot: It draws a very thin line between product liability and the professional liability of medical entities using it.

Emergence of new risks

The increased use of technology over the past few years has resulted in a greater exposure to cyber risks. In 2020 and 2021, many examples revealed the vulnerability of software, making it an easy target for cyber criminals. Hospitals, although a critical infrastructure, are often underfunded when it comes to cyber security. Hence, cyber-attacks, using ransomware to encrypt software and extort money from victims are a real danger to hospitals. According to Check Point data2, the number of attacks against healthcare entities has increased by 45% globally since November 2020. Central Europe has been the most affected with a 145% increase. Eastern Europe is not far behind with a 97% increase. Criminals are looking for fast and easy money. Healthcare unfortunately is an easy target for them.
Medical documentation is nowadays purely digital. The mere fact that this involves sensible data should improve data security. Nonetheless, data breaches, exposing such sensitive data, are very valuable to cyber criminals. According to Tenable data published in January 20213, healthcare entities are the most exposed industry. Data breaches were the cause in 24.5% of all cases, resulting in over 22 billion records exposed. The shared use of technology creates new access points which cyber criminals may use to harm any apparatus connected to internet. In healthcare, this creates some very scary scenarios.
The current situation, combined with existing and new megatrends, poses a huge challenge for all those involved in and responsible for risk management in the healthcare industry. Even though new technologies greatly support the industry, they come with new risks that must be managed. We are also faced with an increasing number of people needing medical services and a decreasing number of medical staff able to provide these services to them. The widespread digitisation in the market, coupled with process automation will require new types of risk specialists. Specialists who are experts in defining, predicting and transferring these risks – just in case, when the worst case scenarios do occur.


Patrycja Paluszyńska

Lider Praktyki Financial Lines/Financial Institutions
Broker ubezpieczeniowy i reasekuracyjny

T+48 785 090 715

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The Quiet Revolution

At the same time and with increasing urbanisation, infrastructure and smart city developments, a stronger focus will be put on making infrastructure and transport more efficient and sustainable.

There are a number of large forces at work which form the basis for the framework in which the construction sector operates and develops.

  • Urbanisation is one of the key developments which can be observed in industrialised and emerging economies alike. The pandemic briefly shifted public focus to remote working and an increased demand for more room and quality of accommodation for certain, mostly white-collar professions, but this does in no way slow down the global trend.
  • Secondly, globalisation is increasing. Again, the vulnerability of global supply chains is a recent and widely shared experience. It remains to be seen in which sec- tors, if at all, a trend back to local sourcing will pick up.
  • Demographic shifts, climate change and rapid technologi- cal advancements complement the macro megatrends. On the demand side, they cause shifts in consumer priorities with sustain- ability becoming an increasingly relevant piece of the puzzle either as constraint, when it comes to achieving those goals, or as pre-requisite in sourcing and making investment decisions.

Construction is an industry which in the past has often been called out for showing slow growth in productivity in comparison to stationary industries as well as other sectors. And while there is a vivid discussion of whether those measures of productivity adequately reflect the output rendered or whether they should be amended, it is uncontested that foreseeable technological change has the potential to boost the sector into something that could aptly be referred to as Industry 4.0.
Environmental aspects and technological progress will be the main pivotal elements coining and shaping the industry in the coming decades.

Requirements for durability, safety and longevity will increase. New challenges in this regard will have to be overcome in the light of climate change and more unpredictable exposures than in the past. Climate adaption projects, for example to better prevent flooding, are expected to be among the largest and most expensive infrastructure projects in the coming decades, as policymakers set out to protect and sustain population centres against new – or resurrected – exposures. Jakarta, most commonly cited as one of the fastest sinking cities, or the recent floods in Turkey, Belgium and Germany are just hints of what may become necessary on a wider scale. There is, yet again, a divide between developed and emerging markets, with the latter being most exposed and lacking financing.

Influencer climate change

At the same time and with increasing urbanisation, infrastructure and smart city developments, a stronger focus will be put on making infrastructure and transport more efficient and sustainable. City planners are shifting away from privately owned fuel-powered cars to pursuing new concepts.

Electric vehicles or micro-mobility options like dockless bikes and scooters are already a thing of the present. They will, however, require continued adaptation of existing infrastructure with regards to separate lanes, parking, and storage facilities instead of parking for vehicles with combustion engines. Shared autonomous vehicles, airborne options like flying taxis and electrical vertical take-off and landing crafts (eVTOLs) may sound utopian, but they are feasible, given recent advances in battery technology. Construction firms will continue to specialise in mass transit, rail and bus projects. As pioneers of adopting alternative mobility, they will benefit from the development.
Our natural water resources are globally under pressure as well. Increased investments will therefore flow into water resource management and water desalination. Some of the largest cities worldwide are severely water stressed. This raises the question of whether the price of water will also come under pressure. After all, while being a redundant resource in a few areas of the world, the scarcity of water as a vital element prevails on every continent.
Green construction, based on a sustainable foundation, can hence be expected to be the first order of business. This is a topic with geopolitical reach and indeed multi-facetted. The topic, however, seems to have reached a serious turning point. In public debates an increasing number of voices warn that we have already passed a point of no return, and some effects caused by mankind’s actions are irreversible. An almost equally large number of people negates or doubts the very fact. Regulators and policymakers are expected to increasingly address these issues, as the recent regulation with regards to socially responsible ESG investment criteria shows. A case in point
is the practice of climate-washing and greenwashing used by some to optimise a company’s or a product’s profile. Efforts have been made to prevent this from becoming a mere compliance-driven ticking-the-box exercise and turn it into an effective instrument.

Technology in the driver seat

Technological advances are considered an integral part at the design stage, changing the risk and benefits profile of assets during the construction and operation phase. The implementation of new technologies is bound to have an effect through labour restructuring, for instance, and an increased dependency on data and internet opens
a wider array of questions when it comes to cyber-attacks. With infrastructure often being of strategical relevance to countries, the further proliferation of connected infrastructure assets goes hand in hand with an increased exposure.
The trends in technology which are expected to drive the industry are modular construction and new materials, including increased energy efficiency, prefabrication, and Internet of Things (IoT). IoT is a seemingly innocuous acronym. Its relevance as a disruptive tech- nology can hardly be overstated. Connected construction sites can improve their productivity level and use IoT solutions for predictive maintenance of plants, machinery and buildings.
There is an array of companies, spanning from global players who increasingly position themselves as tech companies operating in the field of construction down to the regular (sub)contractor and craftsman. Still, the change will affect all levels over time. The main barriers, according to a recent GlobalData survey on ESG investments, are construction cost and lack of return on investment.

While the former is tied to the readiness of market demand to pay a premium for achieving these deliverables, the second comprises the question of whether investments in new technologies and material can bolster the ROI. Considering the risks incurred in the construction industry, this is low compared to other industry sectors. Modularisation and prefabrication designs increase efficiency as well as safety. Investments made into new materials, such as high-strength concrete, geosynthetics, geotextiles, fire-resistant timbers and self-healing materials may need a longer period until they pay-off but they are an ideal means to strategically position companies for meeting the changing requirements driven by the macro environment.

Risk management and insurance follow suit

The consequences for the insurance industry are twofold.

For one, existing insurance solutions must be adapted. Increased losses caused by Nat Cat or damage due to faulty materials or tougher workmanship challenges will be reflected in engineering, professional indemnity and general liability ratings.

On the other hand, new products can establish themselves, like parametric covers which pay as soon as a certain measurable trigger is exceeded. Cyber insurance, an exotic term just a few years ago, is widely known today and is sometimes catchingly referred to as the “fire insurance of the 21st century”. It has become a required basic cover for companies competing in today’s digital environment.

Richard Krammer

Group Practice Leader Construction & Real Estate

T +43 664 810 29 63

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